| Metric | Current Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue | ¥1403.1B | ¥1365.4B | +2.8% |
| Operating Income | ¥68.6B | ¥63.0B | +8.9% |
| Ordinary Income | ¥68.3B | ¥61.9B | +10.5% |
| Net Income | ¥46.0B | ¥42.7B | +7.8% |
| ROE | 1.5% | 1.4% | - |
For the quarter ended Q1 of the fiscal year ending February 2027, Revenue was ¥1,403.1B (YoY +¥37.7B, +2.8%), Operating Income was ¥68.6B (YoY +¥5.6B, +8.9%), Ordinary Income was ¥68.3B (YoY +¥6.5B, +10.5%), and Net Income attributable to owners of the parent was ¥46.0B (YoY +¥3.3B, +7.8%), resulting in year-over-year increases in both sales and profits. Operating margin improved to 4.9%, up 0.3pt from 4.6% in the prior-year quarter, while SG&A ratio declined 0.4pt to 34.3%, indicating effective SG&A control. The core Retail Business reported Revenue of ¥1,351.1B (+2.6%) and Operating Income of ¥51.6B (+7.1%) with steady performance. High-margin Retail Adjacent Businesses posted Revenue of ¥43.8B (+7.5%) and Operating Income of ¥15.8B (+16.4%, margin 36.1%), delivering double-digit profit growth and contributing to overall margin improvement. Special gains/losses had a net impact of +¥2.5B, minor in scale, indicating limited one-off effects. Progress toward the full-year plan stands at roughly 24% for Revenue and Operating Income and 26% for Net Income, broadly on a linear pace.
[Revenue] Revenue totaled ¥1,403.1B, up 2.8% YoY. By segment, the Retail Business accounted for ¥1,351.1B (96.3% of total, +2.6% YoY) and remains the core, with stable same-store traffic and average spend. Retail Adjacent Business continued high growth at ¥43.8B (3.1% of total, +7.5% YoY), driven by expanding tenant income and financial services revenue. Other businesses contributed ¥8.2B (0.6% of total, +3.6% YoY). After inter-segment eliminations, external customer sales across all segments rose 2.8% YoY, reflecting base growth in retail supplemented by high growth in adjacent businesses.
[Profitability] Gross profit was ¥399.3B, with a gross margin of 28.5%, down 0.2pt from 28.7% in the prior-year quarter. SG&A totaled ¥481.4B (SG&A ratio 34.3%, improved 0.4pt from 34.7%), reflecting efficiency gains. As a result, Operating Income rose to ¥68.6B (Operating margin 4.9%, +0.3pt YoY). Non-operating income was ¥3.4B and non-operating expense ¥3.7B, roughly offsetting each other, leading Ordinary Income to expand to ¥68.3B (+10.5%). Special gains of ¥3.9B (including ¥0.7B gain on disposal of fixed assets) and special losses of ¥1.4B (including ¥0.5B impairment losses and ¥0.2B loss on disposal of fixed assets) produced a net +¥2.5B, bringing profit before tax to ¥70.8B (+14.8%). After deducting corporate taxes of ¥24.8B (effective tax rate 35.0%) and non-controlling interests of ¥0.8B, Net Income attributable to owners of the parent was ¥46.0B (+7.8%), achieving both revenue and profit increases.
The Retail Business delivered Operating Income of ¥51.6B (margin 3.8%), up 7.1% YoY, showing solid profit growth that outpaced modest revenue increases due to store operations efficiency and optimized promotional spending. Retail Adjacent Business recorded Operating Income of ¥15.8B (margin 36.1%), up 16.4% YoY, a double-digit increase driven by expansion of high-value revenue streams such as tenant income and financial services, accounting for roughly 23% of consolidated Operating Income and driving margin improvement. Other businesses posted Operating Income of ¥1.8B (margin 21.7%), down 10.9% YoY, impacted by demand fluctuations in wholesale of apparel and related products. Consolidated Operating Income after inter-segment adjustments was ¥68.6B, reflecting a balance of stable retail growth and high profitability in adjacent businesses.
[Profitability] Operating margin improved to 4.9% (prior 4.6%, +0.3pt) and Net margin improved to 3.3% (prior 3.1%, +0.1pt). Gross margin slightly declined to 28.5% (prior 28.7%, -0.2pt), but SG&A efficiency (34.3% vs prior 34.7%, -0.4pt) supported an increase in Operating margin. ROE was 1.5% (prior 1.4%), still low but slightly higher due to margin improvements. EPS was 21.55円 (prior 19.75円, +9.1%), outpacing Net Income growth.
[Cash Quality] OCF/EBITDA was 0.34x, down substantially from 0.89x a year ago, indicating weaker cash conversion. Operating Cash Flow was ¥38.9B, a 0.86x ratio versus Net Income of ¥46.0B, with deterioration in working capital—accounts receivable -¥69.0B and inventories -¥6.9B—being the main drivers. The accrual ratio is 0.1%, indicating high quality of earnings.
[Investment Efficiency] Total asset turnover was 0.23x/year (prior 0.23x), unchanged. The business is asset-intensive with tangible fixed assets ¥3,599.6B (60.1% of total assets), resulting in structurally low asset turnover. Capital expenditures were ¥60.5B, 1.33x depreciation of ¥45.5B, reflecting ongoing maintenance and growth investments in stores and equipment.
[Financial Soundness] Equity Ratio was 51.6% (prior 51.7%), stable. Current Ratio was 91.8% (prior 95.9%), below 1.0x, suggesting attention to short-term liquidity. Debt/Equity was 0.32x (interest-bearing debt ¥989.3B / equity ¥3,093.8B), indicating a conservative capital structure. Interest coverage was strong at 21.6x on an EBIT basis and 35.9x on an EBITDA basis. Debt/EBITDA at 8.7x is high, but long-term borrowings of ¥817.8B predominate, limiting short-term debt pressure.
Operating Cash Flow was ¥38.9B, down 84.9% YoY. Although profit before tax of ¥70.8B plus non-cash items such as depreciation of ¥45.5B produced a subtotal of ¥93.0B in operating cash flow before working capital, changes in working capital—accounts receivable increase -¥69.0B (DSO extended to 179 days), inventory increase -¥6.9B (DIO extended to 136 days), accounts payable increase +¥34.5B, and deposits received increase +¥35.2B—subtracted from cash. Corporate tax payments of -¥53.2B further compressed operating cash flow. Investing Cash Flow was -¥66.9B, primarily capital expenditure of -¥60.5B, intangible asset acquisitions -¥3.7B, acquisition of investment securities -¥5.2B, offset by proceeds from sale of fixed assets +¥2.4B, resulting in a net outflow. Financing Cash Flow was -¥55.8B, with net increase in short-term borrowings +¥48.7B, repayment of long-term borrowings -¥72.2B, dividend payments -¥31.5B, and dividends to non-controlling interests -¥0.3B as main items. Free Cash Flow (Operating CF + Investing CF) was -¥28.0B, and dividends and debt repayments could not be funded solely from internal cash, supplemented by increased short-term borrowings. Cash and deposits decreased from ¥280.9B at the beginning of the period to ¥197.1B at the end, a decline of -¥83.8B, reducing liquid reserves.
Against Ordinary Income of ¥68.3B, non-operating income of ¥3.4B (0.2% of Revenue) was composed of interest and dividend income ¥0.5B, equity-method income ¥0.1B, etc., indicating limited non-recurring bias. Non-operating expense of ¥3.7B was mainly interest expense ¥3.2B, showing limited burdens outside core operations. Net special gains/losses were +¥2.5B (0.2% of Revenue), including ¥0.7B gain on disposal of fixed assets, ¥0.5B impairment losses, and ¥0.2B loss on disposal of fixed assets; all minor and temporary. Comprehensive income of ¥46.2B versus Net Income attributable to owners of the parent of ¥45.3B differed mainly due to valuation differences on securities +¥1.0B and actuarial differences on retirement benefits -¥0.9B, indicating limited distortion. Operating Cash Flow of ¥38.9B versus Net Income of ¥46.0B yields an OCF/Net Income of 0.86x, somewhat low, with working capital increases in receivables and inventories temporarily depressing cash conversion quality. OCF/EBITDA at 0.34x (prior 0.89x) suggests promotional period-related increases in receivables and inventory accumulation; monitoring improvement through collection and liquidation is warranted.
Full-year plan: Revenue ¥5,871.0B (YoY +6.5%), Operating Income ¥290.0B (+6.5%), Ordinary Income ¥284.0B (+3.8%), Net Income attributable to owners of the parent ¥174.0B. Q1 results represented 23.9% of full-year Revenue (¥1,403.1B), 23.7% of Operating Income (¥68.6B), 24.1% of Ordinary Income (¥68.3B), and 26.4% of Net Income (¥46.0B). Revenue and Operating Income are slightly below a standard linear 25% pace, while Net Income is ahead. Special gains/losses had minimal impact; core business is maintaining a roughly linear pace. No revisions to forecasts have been announced; at present, the probability of achieving the plan is secure. Key factors for achieving full-year targets include recovery of cash flow via inventory and receivables optimization and continued high margins in adjacent businesses.
Dividend payments during the quarter totaled ¥31.5B; payout ratio relative to Net Income attributable to owners of the parent was approximately 68.5%. A 3-for-1 stock split of common shares became effective on March 1, 2026; the full-year dividend forecast for FY2027 is ¥15.00 per share (post-split; equivalent to ¥90.00 pre-split). Free Cash Flow was -¥28.0B, and dividend payments were not fully covered by internal funds, supplemented by an increase in short-term borrowings of ¥48.7B. If Operating CF recovers and working capital normalizes, dividend cash coverage is expected to improve. No share buybacks were recorded; shareholder returns remain centered on dividends.
Working Capital Management Risk: With accounts receivable -¥69.0B and inventories -¥6.9B, working capital deteriorated and Operating CF declined -84.9% to ¥38.9B. DSO is 179 days and DIO is 136 days; slower turnover in receivables and inventory, if prolonged due to promotional demand variability or procurement adjustments, could further weaken cash generation. Current Ratio at 91.8% also pressures short-term liquidity, necessitating monitoring of cash management.
Sustainability of Profit Improvement Risk: Gross margin slipped to 28.5% from 28.7% a year earlier, and Operating margin was supported by SG&A improvement to 34.3% (-0.4pt). Future price competition or rising costs could compress gross margins, and if SG&A reductions reach their limit, Operating margin could be pressured. If high-margin adjacent business growth slows, the company-wide margin improvement trend may decelerate.
Short-term Liquidity Risk: Current Ratio of 91.8% is below 1.0x, short-term borrowings increased to ¥171.5B (+39.7%), and cash and deposits fell to ¥197.1B (-29.8%). Debt/EBITDA at 8.7x indicates high leverage, and during periods of declining Operating CF, short-term debt repayment pressure could constrain liquidity. Although interest coverage is sufficient, combined revenue declines or margin deterioration could reduce financial flexibility.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 4.9% | 3.4% (0.8%–7.7%) | +1.5pt |
| Net Margin | 3.3% | 2.2% (0.5%–6.2%) | +1.0pt |
Operating and Net margins exceed the industry median, with SG&A efficiency and high-margin adjacent businesses providing a relative advantage in profitability.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 2.8% | 7.7% (0.8%–14.6%) | -4.9pt |
Revenue growth trails the industry median, reflecting a business model focused on stable same-store growth and a regional, community-focused strategy. Expansion pace is modest compared with high-growth peers.
※Source: Company aggregation
Margin Improvement and High-Margin Growth in Adjacent Businesses: Operating margin improved to 4.9% (+0.3pt), supported by a 36.1% margin in Retail Adjacent Business, underpinning consolidated profitability. SG&A ratio improved to 34.3% (-0.4pt), indicating effective SG&A control. Continued expansion of adjacent businesses and maintenance of gross margins at existing stores will be key to sustaining margin trends. Versus industry, Operating margin is +1.5pt higher, securing relative profitability advantage.
Need to Improve Working Capital and Cash Flow: Operating CF declined to ¥38.9B (-84.9% YoY) due to accounts receivable -¥69.0B and inventories -¥6.9B. OCF/EBITDA is low at 0.34x, with DSO 179 days and DIO 136 days constraining cash conversion. While likely driven by promotional-period dynamics, recovery of Operating CF through inventory reduction and receivables collection in H2 is a key monitoring point. Short-term borrowings +¥48.7B and cash deposits -¥83.8B indicate reduced liquidity and the need to improve the Current Ratio of 91.8%.
Progress vs Full-Year Guidance and Financial Soundness: Q1 progress vs full-year plan is about 24% for Revenue and Operating Income, roughly linear. Dividend payout ratio around 69% maintains shareholder returns, but Free Cash Flow negative means internal funds alone do not fully cover payouts. Debt/EBITDA at 8.7x is high, but interest coverage at 21.6x and Equity Ratio at 51.6% support financial stability. Improvement in Operating CF and working capital normalization in H2 are necessary to sustain dividends and financial flexibility.
This report is an AI-generated earnings analysis prepared by analyzing XBRL earnings disclosure data. It does not constitute a recommendation to invest in any particular security. Industry benchmarks are reference information compiled by the firm based on publicly disclosed financial statements. Investment decisions are your own responsibility; please consult professionals as appropriate.